­A New European Growth Agenda

BRUSSELS – Austerity alone cannot solve Europe's economic and financial crisis. Growth and jobs need to be promoted with equal zeal. European Union leaders now recognize this: kick-starting growth in 2012 was high on the agenda at the European Council’s meeting on January 30. But the big question remains: How?

The need for immediate action is clear. The eurozone’s economy contracted in the last three months of 2011; even Germany’s shrank. The new year is looking grim. France is flat-lining (as is Britain). Italy and Spain have sunk into deep recession. Greece is in its fifth year of a slump. And eurozone unemployment is at record highs, with nearly one in two young people jobless in Spain and Greece.

Until growth resumes, any tentative financial stabilization will be extremely fragile. Recession will hit banks’ and governments’ already-weak balance sheets, increasing pressure for faster deleveraging. But, while gradual adjustment is essential, faster and deeper cuts are largely self-defeating: big reductions in private credit and government spending will cause a sharper slowdown – and thus a vicious downward spiral. A big new push for growth is therefore vital.

Project Syndicate provides readers with original, engaging, and thought-provoking commentaries by global leaders and thinkers. By offering incisive perspectives from those who are shaping the world’s economics, politics, science, and culture, Project Syndicate has created an unrivaled global venue for informed public debate.